Incentive Contracts

Susheng Wang ()
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Susheng Wang: Hong Kong University of Science and Technology

Chapter Chapter 12 in Microeconomic Theory, 2018, pp 405-434 from Springer

Abstract: Abstract Besides asymmetric information, there is another type of information problem, called the incentive problemIncentive problem . For example, in an employer-employee relationship, the employee’s applied effort may be observable by his employer but not verifiable to a court. If so, the effort cannot be bounded by a contract. In this type of problem, information is symmetric: both the employer and the employee have the same set of information. But a third party, the court, cannot observe the information. So the issue here is: how does the employer provide sufficient incentives in a contract to motivate the employee?

Date: 2018
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DOI: 10.1007/978-981-13-0041-7_12

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